Financial Quotient

What is maximum drawdown?

The maximum drawdown is the measure of the largest drop from the peak of your investment value to the bottom of that investment value over the history of the portfolio, before the next peak is reached.

The measure is usually taken within a specific timeframe such as over a one-year period. It is usually quoted as a percentage of the peak value.

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A version of this article appeared in the print edition of The Sunday Times on January 06, 2019, with the headline 'What is maximum drawdown?'. Print Edition | Subscribe